Zombie companies are a phenomenon that has a significant impact on the economy, ethics, and society in general.
These companies, which should be bankrupt according to economic criteria, remain artificially operational despite their high indebtedness, inefficiency, and difficulties in generating cash flows. At first glance, they may seem insignificant, but their existence has direct consequences both locally and globally.
What does the presence of zombie companies in the business market imply?
In economic terms, the presence of zombie companies in the business market has proven to be detrimental to competitiveness. These companies consume resources destined for other, more productive companies, which creates a disadvantage for overall economic growth. Countries such as Japan, China, the United Kingdom, and Spain have already become aware of this problem and have increased research in this field. Institutions such as the OECD, the European Commission, and various central banks have also expressed concern in this regard.
From an ethical perspective, zombie companies generate moral hazard situations due to their lack of liquidity and inability to face the consequences of the risky decisions they make. This transfer of risk from owners to creditors exposes the latter without full access to relevant information. Thus, government aid to these companies often proves to be ineffective.
However, there is a social perspective that cannot be ignored. The survival of these companies provides jobs that would not otherwise exist. Despite being oversized in terms of headcount, a restructuring would have a direct impact on employment. In addition, zombie companies would also affect suppliers and creditors, who face considerable difficulties if they cannot recover their investments in these companies.
How can this business phenomenon be solved?
Ultimately, the dichotomy between the economic and the social must be evaluated in each specific case. Economists and business professionals alike are constantly immersed in this debate, seeking effective solutions to maintain competitiveness and, in turn, keep a strong and just society.
Studying this phenomenon helps to generate a broader perspective of the complex entrepreneurial ecosystem and the economic, ethical, and social implications that can arise. The challenge is to strike a balance between fostering economic competitiveness and promoting sustainable social development. The road ahead requires a joint commitment between economic and governmental actors to generate effective solutions that drive growth while protecting the well-being of society at large. Unmasking zombie companies and taking steps to address their redundant effects is an important step toward a healthier and more prosperous business landscape.
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Source: Zombie companies exist and have an impact on competitiveness and employment
